Extending mobile licences: a bird in the hand…

“A bird in the hand is worth two in the bush,” says the old English proverb. To put it less elegantly, this means a certain benefit is better than a greater benefit with an element of uncertainty.
| Martin Sims

Over the next few months, the bird in the hand for EU member states will be their right to use spectrum auctions and the two in the bush will be the European Parliament’s proposal to retrospectively impose a 25-year duration on every mobile licence.

To become EU law, the MEPs’ amendments to the connected continent package need the support of member states and that scrutiny process has only just begun.

Will national exchequers be willing to forgo that instant cash-in-hand boost worth hundreds of millions of Euros that comes with a spectrum auction? Will they accept the MEPs’ argument that the enhanced business confidence produced by extending licences will create greater longer-term benefits though enhanced network investments?

In these times of austerity, that’s a big ask, not helped by weaknesses in the “middle ground” solution of extending licence terms but increasing annual spectrum fees.

How should those fees be set? If you set them by reference to previous auctions, why get rid of auctions in the first place? How do you take account of technological or commercial developments that may make one band increase or decrease in value? If you then rely on submissions from operators, you turn the real world pricing certainty of an auction into an essay-writing competition for lobbyists.

The UK has adopted perpetual mobile licences, so there are precedents, but will other national treasuries accept the cutting of this cash flow lifeline? If Europe’s purse keepers match the MEPs’ enthusiasm, it would be a big surprise.

Martin Sims, PolicyTracker

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